Craft Distiller’s Licenses - Licenses And Fees - Business & Professions - CA

Section § 23500

This law is officially called the Craft Distillers Act of 2015.

This act shall be known, and may be referenced as, the Craft Distillers Act of 2015.

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Section § 23501

This section highlights California's long-standing system for regulating and licensing the sale of alcoholic beverages, known as the 'three-tier system.' This system prevents major producers, distributors, and retailers from being one and the same, aiming to avoid excessive marketing pressures and promote responsible use. However, with the rise of small craft distilleries contributing to job creation and economic growth, the law intends to support these small businesses with specific exemptions while maintaining the core structure of the existing regulatory framework.

The Legislature hereby finds and declares all of the following:

(a) The regulation and licensing of the sale of alcoholic beverages in this state has operated for over 80 years under what is commonly referred to as the “three-tier system,” which generally prohibits vertical integration within the distilled spirits industry. This system has helped in protecting against undue marketing influences within the distilled spirits industry and assisted the goals of promoting temperance and reasonable regulation of the sale of distilled spirits within the state. In addition, this system has helped create thousands of jobs and billions of dollars in economic development within California.

(b) Small craft distillers have begun to operate in this state, and these craft distillers have begun to increase employment and provide jobs and economic development in various locations within the state.

(c) It is the intent of the Legislature, in enacting this act, to encourage the development of the craft distilling industry within the state by enacting various limited exemptions to the general provisions of the three-tier system, while also continuing to uphold and support the three-tier system as the appropriate mechanism for regulating and licensing the sale of distilled spirits in California.

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Section § 23502

If you want to get a craft distiller's license in California, you need to have the equipment and facilities to make distilled spirits commercially. This license allows you to make, flavor, or blend spirits and sell them to other licensed businesses or for delivery out of state. You can produce up to 150,000 gallons yearly, but most of it must be made by you. A license is not available if you already produce or are affiliated with a business that produces over 150,000 gallons yearly, or if you're involved with a wholesaler. You also need to report your production amounts annually, and if you exceed limits, your license may convert to a different type.

(a) The department may issue a craft distiller’s license to a person that has facilities and equipment for the purposes of, and is engaged in, the commercial manufacture of distilled spirits. The craft distiller’s license authorizes the licensee to do all of the following:

(1) Manufacture distilled spirits. For purposes of this article, “manufacture” means the actual distillation of distilled spirits from naturally fermented materials or the redistillation of distilled spirits obtained from another manufacturer of distilled spirits.

(2) Produce distilled spirits. For purposes of this article, “produce” means to mix, color, flavor, or blend distilled spirits, whether manufactured by the licensee or by another manufacturer of distilled spirits, including spirits of wine produced by a winegrower pursuant to paragraph (6) of subdivision (a) of Section 23358.

(3) Only sell distilled spirits that are manufactured or produced by the licensee solely to a wholesaler, manufacturer, winegrower, manufacturer’s agent, or rectifier that holds a license authorizing the sale of distilled spirits or to persons that take delivery of those distilled spirits within this state for delivery or use without the state.

(4) Deal in warehouse receipts.

(5) Manufacture or produce up to 150,000 gallons of distilled spirits per fiscal year (July 1 through June 30), excluding brandy the craft distiller manufactures or has manufactured for it pursuant to a brandy manufacturer license, as reported to the department in the manner prescribed by the department for the fiscal year prior to the date of submitting an application for the license. At least 65 percent of the total volume of distilled spirits manufactured or produced shall be actually manufactured by the licensee. The volume of distilled spirits authorized by this paragraph shall be calculated by adding the volume of distilled spirits, less waste, drawn off the still with the volume of distilled spirits obtained by the licensee from any other source that is not redistilled by the licensee. For purposes of this paragraph, “volume” means the liquid volume and shall not be based on proof gallons or packaged goods.

(b) A craft distiller’s license shall not be issued to any person, any officer, director, employee, or agent of such person, or any person who is affiliated with, directly or indirectly, a person that manufactures or has manufactured for them more than 150,000 gallons of distilled spirits per year within or without the state, excluding brandy it manufactures or has manufactured for them pursuant to a brandy manufacturer license, or to any person that is affiliated with, directly or indirectly, a wholesaler.

(c) A licensed craft distiller shall report to the department, at the time of renewal in the manner prescribed by the department, the amount of distilled spirits manufactured or produced by the licensee specifying, as applicable, the respective amounts of distilled spirits the licensed craft distiller has manufactured itself, obtained from another manufacturer of distilled spirits, and imported, excluding brandy manufactured by or for the licensee pursuant to a brandy manufacturer license, during the previous fiscal year. If the report to the department establishes that the licensee no longer qualifies to hold a craft distiller’s license because the licensee has either exceeded the 150,000 gallon manufacture or production limitation as specified in paragraph (5) of subdivision (a) or actually manufactured less than 65 percent of the total volume of distilled spirits as specified in paragraph (5) of subdivision (a), the department shall renew the license as a distilled spirits manufacturer’s license.

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Section § 23504

This law allows a licensed craft distiller in California to sell a maximum of 2.25 liters of their own distilled spirits to an individual consumer, per day, directly from the site where the spirits are made.

Notwithstanding any other provision, a licensed craft distiller may sell up to the equivalent of 2.25 liters in any combination of prepackaged containers per day per consumer of distilled spirits manufactured or produced by the licensee at its premises to a consumer.

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Section § 23504.5

Licensed craft distillers in California can ship a limited amount of their spirits directly to consumers if they follow strict rules. They can send up to 2.25 liters per day for personal use only. They must keep records of these shipments and require delivery carriers to obtain an adult signature upon receipt. Packages must be clearly labeled to indicate they contain alcohol. This law is only temporary and will expire on January 1, 2026.

(a) Notwithstanding any other provision of this division to the contrary, a licensed craft distiller may directly ship distilled spirits manufactured or produced by the licensee at its premises to a consumer only if they comply with all of the following requirements:

(1) The amount shipped shall not exceed the equivalent of 2.25 liters in any combination of prepackaged containers per day per consumer and shall be solely for the consumer’s personal use and not for resale.

(2) The licensed craft distiller shall maintain adequate records of the shipments and provide those records to the department upon request.

(3) The licensed craft distiller shall require the common carrier to obtain the signature of any individual 21 years of age or older before delivering any distilled spirits shipped to an individual in this state.

(4) The containers in which the distilled spirits are shipped shall be conspicuously labeled with the words: “CONTAINS ALCOHOL: SIGNATURE OF PERSON AGE 21 YEARS OR OLDER REQUIRED FOR DELIVERY.”

(b) This section shall remain in effect only until January 1, 2026, and as of that date is repealed.

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Section § 23506

This law allows a licensed craft distiller, who owns at least 51% of a subsidiary, to have an interest in businesses that hold on-sale licenses to sell alcohol, like restaurants or bars, under certain conditions. First, these businesses must buy all their alcohol from California wholesalers. Second, only up to 15% of the distilled spirits sold can be from the distiller’s own brands or subsidiaries. Distillers can sell directly to these businesses in limited cases, but they can't have interests in more than two such licenses. If a distiller stops qualifying as a craft distiller, they can still keep their interest in these businesses if they had the interest or an application in process while still qualified as a craft distiller.

(a) Notwithstanding any other provision of this division, a licensed craft distiller or one or more of its direct or indirect subsidiaries of which the licensed craft distiller owns not less than a 51-percent interest, who manufactures or produces, bottles, processes, imports, or sells distilled spirits under a craft distiller’s license or any other license issued pursuant to this division, or any officer or director of, or any person holding any interest in, those persons may serve as an officer or director of, and may hold the ownership of any interest or any financial or representative relationship in, any on-sale license, or the business conducted under that license, provided that, except in the case of a holder of on-sale general licenses for airplanes and duplicate on-sale general licenses for air common carriers, all of the following conditions are met:

(1) The on-sale licensee purchases all alcoholic beverages sold and served only from California wholesale licensees.

(2) The number of distilled spirits items by brand offered for sale by the on-sale licensee that are manufactured, produced, bottled, processed, imported, or sold by the licensed craft distiller or by the subsidiary of which the licensed craft distiller owns not less than 51 percent, or by any officer or director of, or by any person holding any interest in, those persons does not exceed 15 percent of the total distilled spirits items by brand listed and offered for sale by the on-sale licensee selling and serving that distilled spirit. Notwithstanding paragraph (1), distilled spirits sold pursuant to this provision may be purchased from a California licensed craft distiller so long as the distilled spirits purchased are produced or bottled by, or produced and packaged for, the same licensed craft distiller that holds an interest in the on-sale license and such direct sales do not involve more than two on-sale licenses in which the licensed craft distiller or any person holding an interest in the licensed craft distiller holds any interest, directly or indirectly, either individually or in combination or together with each other in the aggregate.

(3) None of the persons specified in this section may have any of the interests specified in this section in more than two on-sale licenses.

(b) Notwithstanding any other provision of this division, a licensee that has an interest in one or more on-sale retail licenses pursuant to this section may continue to hold that interest in the event the licensee no longer qualifies as a craft distiller, provided that the interest was held, or an application was pending, at a time when the licensee did hold a craft distiller’s license pursuant to Section 23502. Nothing in this subdivision is intended to prevent the department from denying a pending application for any reason other than the change in license of the licensee.

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Section § 23508

A licensed craft distiller in California can offer a variety of alcoholic beverages, including beers, wines, and spirits, to guests at private events hosted on their premises. These beverages must be bought from a licensed wholesaler if the distiller did not make them. Additionally, craft distillers can sell these beverages to be consumed on-site at a genuine eating establishment they own, provided they are purchased from a wholesaler if not produced by the distiller. If a craft distiller no longer meets the criteria of a craft distiller due to production levels, they can still maintain these privileges.

(a) A licensed craft distiller may also have upon its licensed premises all beers, wines, and distilled spirits, regardless of source, for sale or service only to guests during private events or private functions not open to the general public. Alcoholic beverage products sold at the premises that are not manufactured or produced and bottled by, or manufactured or produced and packaged for, the licensed craft distiller shall be purchased by the licensed craft distiller only from a licensed wholesaler.

(b) A licensed craft distiller may sell all beers, wines, brandies, or distilled spirits to consumers for consumption on the premises in a bona fide eating place as defined in Section 23038, which is located on the licensed premises or on premises owned by the licensee that are contiguous licensed premises and which is operated by and for the licensee, provided that any alcoholic beverage products not manufactured or produced by the licensee must be purchased from a licensed wholesaler. Beer, wine, and brandy may be used in the preparation of food and beverages in the bona fide public eating place for consumption on the premises.

(c) Notwithstanding any other provision of this division, in the event that the licensee no longer qualifies as a craft distiller due to the amount of distilled spirits reported pursuant to Section 23502, the licensee may continue to hold the privileges granted by this section.

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